Gold Drops 1.45% to 3293.35 USD Amidst Bull Camp Divisions

On May 27, the price of gold experienced a significant drop, with spot gold prices falling below 3300 USD per ounce. As of the time of reporting, spot gold was trading at 3293.35 USD per ounce, down 1.45%. This decline comes amidst growing divisions within the Wall Street gold bull camp, with differing views on the long-term prospects of gold prices.

Goldman Sachs and Deutsche Bank remain optimistic about gold's performance by 2026, while Citigroup has expressed a more cautious outlook. Citigroup's latest report suggests that gold prices are likely to stabilize around current levels and fluctuate within a range of 3100 to 3500 USD by the second half of 2025. However, the report also highlights potential risks, including the upcoming U.S. midterm elections and the possibility of a reduction in the Federal Reserve's interest rate cuts, which could mitigate economic growth and global stock market risks.

Citigroup's analysis points to two significant challenges for gold's long-term prospects. Firstly, the current high level of global household gold holdings, which is at its highest point in 50 years, could limit further price increases. Secondly, the potential for a reduction in the Federal Reserve's interest rate cuts could lead to a more stable economic environment, reducing the need for safe-haven assets like gold.

Despite these challenges, Goldman Sachs and Deutsche Bank remain bullish on gold. Goldman Sachs predicts that gold prices could reach 4000 USD by 2026, while Deutsche Bank expects prices to surpass 3700 USD in the coming year. These predictions are based on the expectation of continued economic uncertainty and the potential for further interest rate cuts by the Federal Reserve.

In the short term, analysts from Guotai Junan Futures suggest that gold prices could face support, but the potential for a U.S. credit rating downgrade and liquidity risks in U.S. and Japanese bonds could lead to market volatility in June. The firm also notes that the recent easing of U.S.-China trade tensions and the resilience of the U.S. economy could limit gold's upside potential in the near term.

China International Futures also points to short-term volatility in gold prices, driven by ongoing trade tensions and the potential for a tightening of U.S. dollar liquidity. However, the firm expects gold prices to remain range-bound in the near term, with the potential for a breakout to the upside if economic data continues to improve.

Analysts from Jinrui Futures suggest that investors should remain patient and take advantage of gold's range-bound trading to buy low and sell high. The firm also recommends keeping a close eye on Federal Reserve policy signals and U.S. economic data for potential catalysts for gold price movements.

UBS also recommends that investors consider adding gold to their diversified portfolios, suggesting an allocation of around 5% to manage potential risks. The firm notes that gold's safe-haven status and its negative correlation with other asset classes make it an attractive addition to a diversified portfolio.